Question 1

"Risk" can accurately be included in any transfer/retention decision relieving the user of the burden of making subjective decisions.

Accepted Answer

A) True 
 B)False

Question 2

A difference in conditions (DIC)insurance contract provides high limits of legal liability coverage.

Accepted Answer

A) True 
 B)False

Question 3

From 1997 to 2004,the amount of catastrophe bonds outstanding went from ____________.

Accepted Answer

A) $700 million to just over $2 billion 
B) $700 million to over $4.4 billion 
C) $1.9 billion to $4.4 billion 
D) $4.4 billion to $700 million 
A) $700 million to just over $2 billion 
B) $700 million to over $4.4 billion 
C) $1.9 billion to $4.4 billion 
D) $4.4 billion to $700 million

Question 4

A financial instrument that's value is based on an underlying security or commodity is called a/an

Accepted Answer

A) insurance contract 
B) employment contract 
C) enterprise contract 
D) derivative security 
A) insurance contract 
B) employment contract 
C) enterprise contract 
D) derivative security

Question 5

Which of the following is true concerning the corporate taxation of insurance premiums and the treatment of uninsured losses?

Accepted Answer

A) both premiums and expected losses are deductible at the beginning of the year 
B) uninsured losses are deductible only when they occur and premiums are deductible in the year paid 
C) since payments for insured losses are 100% tax deductible, commercial insurance is economically inefficient 
D) losses paid under the deductible amount are not tax deductible because the insured assumed the losses 
A) both premiums and expected losses are deductible at the beginning of the year 
B) uninsured losses are deductible only when they occur and premiums are deductible in the year paid 
C) since payments for insured losses are 100% tax deductible, commercial insurance is economically inefficient 
D) losses paid under the deductible amount are not tax deductible because the insured assumed the losses

Question 6

Hedging is

Accepted Answer

A) selling two investments that are both expected to lose 
B) buying two investments that are both expected to make a profit 
C) taking two positions whose gains and losses will offset each other 
D) buying insurance against a fortuitous loss 
A) selling two investments that are both expected to lose 
B) buying two investments that are both expected to make a profit 
C) taking two positions whose gains and losses will offset each other 
D) buying insurance against a fortuitous loss

Question 7

One of the major problems associated with an RMIS is that if the data are inaccurate,any resulting analysis can be misleading.

Accepted Answer

A) True 
 B)False

Question 8

An insurer authorized to do business in a particular country is said to be:

Accepted Answer

A) admitted 
B) legally licensed 
C) participating 
D) global 
A) admitted 
B) legally licensed 
C) participating 
D) global

Question 9

All the following are problems of risk management information systems (RMIS)except:

Accepted Answer

A) can generate massive amount of reports and data and slow down analysis 
B) data inaccuracy and integrity can cause false reports 
C) the speed of generating and the usefulness of the information can slow most analysis down 
D) the large number of variables that need to be tracked can be difficult to isolate 
A) can generate massive amount of reports and data and slow down analysis 
B) data inaccuracy and integrity can cause false reports 
C) the speed of generating and the usefulness of the information can slow most analysis down 
D) the large number of variables that need to be tracked can be difficult to isolate

Question 10

What factors are emphasized more in international risk management than domestic risk management?

Accepted Answer

There is a change in emphasis when engag

Question 11

All the following are important in the transfer/retention decision related to the ability to pay for losses except:

Accepted Answer

A) liquidity of assets 
B) stability of net income 
C) amount of net worth 
D) historical stockholder dividend pattern 
A) liquidity of assets 
B) stability of net income 
C) amount of net worth 
D) historical stockholder dividend pattern

Question 12

The most useful purpose of a risk management information system (RMIS)is to:

Accepted Answer

A) catalogue insurance policies 
B) record, track, and analyze losses 
C) maintain payroll and personnel records 
D) calculate capital budgeting decisions 
A) catalogue insurance policies 
B) record, track, and analyze losses 
C) maintain payroll and personnel records 
D) calculate capital budgeting decisions

Question 13

All of the following tasks are performed by a risk management information system (RMIS)except:

Accepted Answer

A) track frequency, severity and final outcome of losses 
B) provide statistical data to spot trends 
C) provide insurance policy data and loss history 
D) provide an instantaneous picture of the company's balance sheet 
A) track frequency, severity and final outcome of losses 
B) provide statistical data to spot trends 
C) provide insurance policy data and loss history 
D) provide an instantaneous picture of the company's balance sheet

Question 14

All of the following are considered a financial risk handled by financial risk management except:

Accepted Answer

A) currency risk 
B) liquidity risk 
C) product marketability risk 
D) commodity price risk 
A) currency risk 
B) liquidity risk 
C) product marketability risk 
D) commodity price risk

Question 15

The transfer/retention risk management decision is unimportant and therefore risk managers should not waste their time on the decision.

Accepted Answer

A) True 
 B)False

Question 16

Some political risk coverage is available to American firms doing business in less developed countries through the:

Accepted Answer

A) Federal Deposit Insurance Corporation (FDI
C)  
B) First National Bank of America 
C) U.S. Export Import Bank 
D) U.S. Chamber of Commerce 
A) Federal Deposit Insurance Corporation (FDI
C)  
B) First National Bank of America 
C) U.S. Export Import Bank 
D) U.S. Chamber of Commerce

Question 17

International risk management is identical in emphasis and complexity as domestic risk management.

Accepted Answer

A) True 
 B)False

Question 18

Most goods in transit are not eligible for coverage under an open cargo marine insurance policy.

Accepted Answer

A) True 
 B)False

Question 19

Risk managers working outside the U.S.often use admitted insurers,even when they are not legally required to do so by the foreign government. Why?

Accepted Answer

A) even when the foreign government does not require it, the US government does 
B) this is part of the unwritten code of ethics that US risk managers voluntarily adhere to 
C) it results in both premiums and losses being expressed in terms of local currency 
D) because foreign insurance contracts are generally written in English 
A) even when the foreign government does not require it, the US government does 
B) this is part of the unwritten code of ethics that US risk managers voluntarily adhere to 
C) it results in both premiums and losses being expressed in terms of local currency 
D) because foreign insurance contracts are generally written in English

Question 20

Which of the following provides for the purchase of the legal right to buy or sell an asset at an agreed upon price for a set period of time?

Accepted Answer

A) forward contracts 
B) interest rate swaps 
C) future contracts 
D) traded options 
A) forward contracts 
B) interest rate swaps 
C) future contracts 
D) traded options

Exam 17: Advanced Topics in Risk Management

"Risk" can accurately be included in any transfer/retention decision relieving the user of the burden of making subjective decisions.

A difference in conditions (DIC)insurance contract provides high limits of legal liability coverage.

From 1997 to 2004,the amount of catastrophe bonds outstanding went from ____________.

A financial instrument that's value is based on an underlying security or commodity is called a/an

Which of the following is true concerning the corporate taxation of insurance premiums and the treatment of uninsured losses?

Hedging is

One of the major problems associated with an RMIS is that if the data are inaccurate,any resulting analysis can be misleading.

An insurer authorized to do business in a particular country is said to be:

All the following are problems of risk management information systems (RMIS)except:

What factors are emphasized more in international risk management than domestic risk management?

All the following are important in the transfer/retention decision related to the ability to pay for losses except:

The most useful purpose of a risk management information system (RMIS)is to:

All of the following tasks are performed by a risk management information system (RMIS)except:

All of the following are considered a financial risk handled by financial risk management except:

The transfer/retention risk management decision is unimportant and therefore risk managers should not waste their time on the decision.

Some political risk coverage is available to American firms doing business in less developed countries through the:

International risk management is identical in emphasis and complexity as domestic risk management.

Most goods in transit are not eligible for coverage under an open cargo marine insurance policy.

Risk managers working outside the U.S.often use admitted insurers,even when they are not legally required to do so by the foreign government. Why?

Which of the following provides for the purchase of the legal right to buy or sell an asset at an agreed upon price for a set period of time?

Fundamentals and Terminology

Defining the Insurable Event

Risk Management

Financial Services Companies

Insurance Occupations

the Insurance Market: the Economic Problem

Insurance Regulation

Insurance Contracts

Basic Property and Liability Insurance Contracts

Homeowners Insurance

the Personal Auto Policy

Professional Financial Planning

Life Insurance Policies

Standard Life Insurance Contract Provisions And Options

Annuities

Medical Expense and Disability Insurance

Commercial Property Insurance

Commercial Liability Insurance

Bonding,Crime Insurance and Reinsurance

Employee Benefits

Social Security

Unemployment and Workers Compensation Insurance

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